Rent to Rent Firms must be included in New Lettings Laws, PRS Insists

Earlier last month, the Conservative Party announced that all buy-to-let landlords will be forced to register with a redress scheme under new lettings laws, as is already compulsory for all letting and estate agents. But the Property Redress Scheme (PRS) insists that an introduction of this kind should also be extended to rent to rent firms.

Rent to rent firms operate by taking on a property from a landlord and, in return, offering them guaranteed fixed rent for a set period of time – please be aware that this is completely different to Rent Guarantee Insurance. The landlord then gives consent to the rent to rent operator to let and manage their property, usually on a room-by-room basis, to other tenants, acting as a middleman between the landlord and tenants.

Rent to rent is most commonly used on Houses in Multiple Occupation (HMOs), where the renter makes a profit from the shared accommodation model.

Rent to Rent Firms must be included in New Lettings Laws, PRS Insists

Rent to Rent Firms must be included in New Lettings Laws, PRS Insists

However, the rent to rent model does not fit the traditional definition of lettings or property management work, meaning that there is a question as to whether rent to rent companies currently have to be signed up to a redress scheme by law.

If all other parties involved in the lettings process must be signed up to a redress scheme, Sean Hooker, the Head of Redress for the PRS, believes that rent to rent firms should also be included as part of the legislation.

He says: “Rent to rent companies market themselves as taking away the hassle of being a landlord. However, these are complex legal arrangements. The rent to rent effectively becomes the tenant and the person living in the property a sub-tenant.

“Landlords are attracted by a guaranteed rental income, but often do not realise they have to pay for an insurance policy to cover this. They also do not understand whose responsibility it is to maintain the property and think they will always get the property back in the same condition as they let it.”

He continues: “From the occupier’s viewpoint, they do not know they have no relationship with the property owner, so, when they have problems with repairs, they can be left high and dry.

“The current redress client does not cover tenant and landlord disputes, which essentially the relationship of the rent to rent and their sub tenant is.”

Hooker adds: “Reputable rent to rent providers go to pains to make their terms transparent and fair, but, too often, landlords turn to speculative firms trying to exploit the market and are all too aware of the loopholes they can use to their advantage.”

The steady growth and continuation of UK rental demand and increase in excessive rent prices have driven the need for tenants to rent rooms in shared accommodation, as many cannot afford single units, such as studios or one-bedroom flats. This has given birth to a new category of landlord – the shared accommodation provider.

A shared accommodation provider is a professional who owns or manages a property where rooms are let individually, and tenants share facilities such as bathrooms and kitchens. This means that the home is shared by people from more than one household and is generally a HMO – if there are more than five tenants.

Although an efficient solution for the housing shortages across the country, this method of providing accommodation has a mixed reputation.

Monika Zec, of the Shared Accommodation Providers’ Association UK (SAPA UK), the leading non-profit organisation for the multi-let industry, agrees with the PRS and believes that compulsory redress would be the first step to acknowledging shared accommodation as an important market within the private rental sector.

She notes: “London will never return to single occupancy as a norm, especially for young people. Shared accommodation is here to stay and, therefore, the Government should acknowledge this and act proactively. It could become the solution to London’s housing problems on a short, medium and long-term basis, but it all depends on the Government taking the right steps to regulate the industry properly and encourage providers to operate in a professional way.”

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